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Civic Partners Stockton, LLC v. Youssefi

California Court of Appeals, Third District, Sacramento

August 8, 2013

CIVIC PARTNERS STOCKTON, LLC, Plaintiff and Appellant,
v.
CYRUS YOUSSEFI et al., Defendants and Respondents.

CERTIFIED FOR PARTIAL PUBLICATION [*]

APPEAL from a judgment of the Superior Court of Sacramento County No. 03AS00193, Kevin R. Culhane, Judge.

The Law Offices of Malcolm A. Misuraca and Malcolm A. Misuraca for Plaintiff and Appellant.

Wulfsberg Reese Colvig & Firstman Professional Corporation, Charles W. Reese and Michael J. Higgins; Law Offices of Patrick R. Sabelhaus, Patrick R. Sabelhaus and Joel A. Rice for Defendants and Respondents.

HULL, J.

After first contracting with plaintiff Civic Partners Stockton, LLC for the renovation of a historic hotel in downtown Stockton, the Redevelopment Agency for the City of Stockton (the Agency) entered into a new redevelopment agreement with defendant Hotel Stockton Investors (HSI) for the same property. Plaintiff brought this action against the Agency, the City of Stockton (City), and HSI for breach of contract and related claims. Also named as defendants were Cyrus Youssefi (Youssefi) and his company, CFY Development (CFY), the general partner of HSI. (Hereafter, Youssefi, CFY and HSI shall be referred to collectively as the Youssefi defendants.)

The City and the Agency demurred, and the trial court overruled the demurrers. However, this court granted the City and the Agency’s petition for writ of mandate and directed the trial court to sustain the demurrers on the basis of plaintiff’s failure to comply with the Government Claims Act (Gov. Code, § 900 et seq.). Our decision was later affirmed by the California Supreme Court. (City of Stockton v. Superior Court (2007) 42 Cal.4th 730 (City of Stockton).)

The present matter involves plaintiff’s claims against the Youssefi defendants. The trial court granted the Youssefi defendants’ motions for judgment on the pleadings on plaintiff’s first cause of action for conversion of architectural plans, concluding such claim is preempted by federal copyright law. The court also granted summary adjudication on all remaining claims and entered judgment of dismissal. Plaintiff appeals, contending the trial court erred as to each claim and further erred in refusing to grant plaintiff leave to amend.

We conclude the trial court erred in granting judgment on the pleadings on the first cause of action and therefore reverse the judgment of dismissal. The first cause of action is not one for copyright infringement but for conversion of a particular object on which a copyrightable work is imbedded. It is therefore not preempted by federal copyright law. However, we reject plaintiff’s remaining contentions on appeal and conclude the trial court properly granted summary adjudication on all remaining claims.

Facts and Proceedings

Because the trial court granted the Youssefi defendants’ motion for judgment on the pleadings on the first cause of action, we accept as true the allegations of the complaint on that claim for purposes of this appeal. (American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1118.) On all other claims, the trial court granted summary adjudication. We therefore review the evidence on those claims in the light most favorable to plaintiff. (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107.) For some of the facts not in dispute and a portion of the procedural background of this matter, we refer to the prior decision of the California Supreme Court in this matter.

On or about May 2, 2000, the Agency entered into an agreement with plaintiff (the Civic Agreement) for renovation of the Hotel Stockton (Hotel), a historic building at 133 East Weber Avenue in Stockton, California, containing five stories, an underground basement, and 178, 000 square feet of space. Under the terms of the Civic Agreement, the Agency agreed to sell the Hotel to plaintiff for $1, provided plaintiff fulfilled all of its conditions and obligations under that agreement. Concurrently with the Civic Agreement, the City entered into an agreement to lease 65, 000 square feet of office space in the Hotel.

In late 2000 and early 2001, plaintiff entered into negotiations with Paramount Financial Group, Inc. (Paramount) for a joint venture to develop business office space in the Hotel. However, the parties never finalized those negotiations into an agreement. Paramount nevertheless loaned plaintiff and two others $743, 000 to fund early expenses associated with the renovation work.

The City later repudiated the lease for office space and demanded that plaintiff find another use for the upper floors of the Hotel. (City of Stockton, supra, 42 Cal.4th at p. 734.) The City proposed senior housing, which required redesign of the Hotel’s interior and a change in the financing arrangement to include federal and state tax credits. (Ibid.) By the end of 2001, plaintiff had completed new plans for the Hotel and other work needed to apply for the tax credits, at a cost of several hundred thousand dollars. (Ibid.)

In January 2002, the City informed plaintiff it wanted the Youssefi defendants to take over the upper floors in the Hotel, the senior housing, and the tax credit application. (City of Stockton, supra, 42 Cal.4th at p. 735.) The Agency began negotiating with plaintiff over how to protect plaintiff’s interests upon such reassignment. (Ibid.) In February 2002, the Agency entered into an agreement with plaintiff whereby plaintiff would turn over to the Agency a reproducible copy of its plans for the Hotel renovation project subject to the following understanding: “First, the plans are the property of [plaintiff]. Second, the plans can only be used by the [Agency], City or others subject to an agreement between the Agency and [plaintiff] regarding the future renovation of the Hotel (including reimbursement of costs to date), as well as a cooperative agreement between the Agency and [plaintiff] regarding other components of the Channel Head project (including the cinema and B&M Building).”

In March 2002, the Agency entered into a development agreement with HSI (the HSI Agreement) for renovation of the Hotel. Under the HSI Agreement, development of the property was to include 140 senior residence units. The HSI Agreement also provided that, upon completion of all development work and fulfillment of all other obligations under the agreement, the Hotel would be sold to HSI for $950, 000.

On July 9, 2002, the Agency and HSI amended the HSI Agreement to provide for the creation of 156 affordable residential units rather than senior housing units. Also in 2002, Paramount entered into an agreement with HSI for development of the Hotel. The Hotel was eventually renovated by HSI into a single-room occupancy apartment house.

In January 2003, plaintiff filed suit against the City, the Agency and the Youssefi defendants for declaratory relief to establish its rights in the Hotel plans and for damages for breach of and interference with its contracts with the Agency and the City. The City and the Agency demurred and the trial court sustained the demurrer on the following grounds: (1) plaintiff’s rights in the Hotel plans are governed by federal copyright law and within the exclusive jurisdiction of the federal courts, (2) the City was not a party to the Civic Agreement, and (3) the agreement with the Agency cannot support a claim because the statutory requirements for public contracting had not been met. (City of Stockton, supra, 42 Cal.4th at p. 736.)

Plaintiff thereafter amended the complaint and the City and the Agency again demurred. The trial court sustained the demurrers on the breach of contract claims based on uncertainty as to the form of the various contracts. On the declaratory relief claim, the court sustained the demurrer without leave to amend based on federal copyright preemption. (City of Stockton, supra, 42 Cal.4th at p. 736.)

Plaintiff filed a second amended complaint that excluded the declaratory relief claim. The City and the Agency again demurred, this time on the additional basis that plaintiff failed to satisfy the requirements of the Government Claims Act. (City of Stockton, supra, 42 Cal.4th at pp. 736-737.) The trial court overruled the demurrer, concluding the contract claims were sufficiently certain and the Government Claims Act does not apply to contract claims. (City of Stockton, at p. 737.) The City and the Agency then filed a cross-complaint against plaintiff for breach of contract, misrepresentation and failure of consideration. They also filed a petition for writ of mandate with this court, seeking to overturn the order overruling their demurrers. (Ibid.)

This court granted writ relief, concluding plaintiff’s claims are subject to the Government Claims Act, which plaintiff failed to satisfy. However, we further concluded that, if the City and the Agency continue to pursue their cross-complaint, plaintiff may file a cross-complaint of its own asserting defensive claims. (City of Stockton, supra, 42 Cal.4th at p. 737.) The California Supreme Court granted plaintiff’s petition for writ of review and affirmed. (Id. at pp. 737, 748.) However, the high court modified our decision to include directions to the trial court to grant plaintiff leave to amend and to omit directions to permit plaintiff to file a cross-complaint. (Id. at p. 748.)

On March 17, 2008, plaintiff filed a third amended complaint containing eight causes of action: (1) restitution for conversion of the Civic Agreement; (2) restitution for conversion of the Hotel plans prepared at plaintiff’s expense; (3) restitution for conversion of a tax credit partnership between plaintiff and Paramount; (4) restitution for the value of a related cinema lease; (5) inverse condemnation of the Civic Agreement; (6) inverse condemnation of the cinema lease; (7) conversion of the B&M contract mentioned in the February 2002 agreement between plaintiff and the Agency; and (8) declaratory relief. The fourth through seventh causes of action were stated against the City and the Agency alone.

The Youssefi defendants demurred to the third amended complaint. The trial court overruled the demurrers to the first through third causes of action but sustained the demurrer to the eighth cause of action for declaratory relief without leave to amend. Among other things, the court concluded the second cause of action for conversion of the Hotel plans is not preempted by federal copyright law. The Youssefi defendants thereafter filed an answer to the third amended complaint.

On November 24, 2008, plaintiff filed a fourth amended complaint containing just three causes of action: (1) restitution for conversion of the Hotel plans; (2) restitution for conversion of the Paramount partnership; and (3) restitution for conversion of the Civic Agreement.

On April 15, 2009, the trial court sustained demurrers of the City and the Agency to the fourth amended complaint and ordered dismissal of the action as to those defendants.

On October 25, 2010, the trial court granted the Youssefi defendants’ motion for judgment on the pleadings as to the first cause of action, concluding that claim is preempted by federal copyright law. The court also denied leave to amend, concluding plaintiff ...


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